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Weekly COT Report: USD Longs Continue To Wane

Trading Themes:The USD was initially lower last week, extending losses from the release of the Dovish FOMC minutes release, but was able to recover better ground into the week-end. Data was mixed with Retail Sales missing with a print of 0.1% vs 0.2% expected and a CPI falling also printing -0.2% MoM. However, stickiness in core CPI, which surpassed expectations printing 0.2% MoM and 1.9% YoY led the Dollar recovery which was supported by Friday’s US Consumer Confidence survey beat of 92.5 vs 89 expected. Data focus this week will turn to housing starts on Monday and Manufacturing PMIs on Friday

EUR: All eyes turn to the ECB as traders anticipate an extension of QE

GBP: Traders will eye retail sales data this week for further clues as to a rate lift off in the UK

JPY: Quiet week ahead as players mainly sidelined ahead of the much anticipated end of month BOJ meeting

CHF: Swiss Franc to become the seventh major currency to be exchangeable directly for Yuan in Shanghai, according to the PBOC

CAD: Political risk today with national elections ahead of BOC meeting Wednesday

AUD:With China stabilizing attention turns to RBA minutes

Let’s take a look at what the latest COT data is showing us from a trend and net change week over a week perspective…

EUR bearish, decreased on the week

GBP bearish, increased on the week

CHF neutral, flat on the week

JPY bearish, decreased on the week

AUD bearish, decreased on the week

CAD bearish, flat on the week

EURUSD – Outlook Bearish

The single currency benefited from USD weakness to challenge the key 1.1460 level resistance before reversing sharply last week. Comments from ECB’s Nowotny regarding the need for further measure to boost ECB spurred the sell-off. EuroZone September CPI was confirmed at -0.1% with the German ZEW survey showing weakness printing 1.9 vs 6.5 expected. Expectations for further intervention by the ECB are growing ahead of their upcoming meeting this Thursday

COT Indicators

Strength active sell signal, continues to tick up

Index active buy signal, ticks up

Momentum active buy signal, ticks up

LFOrder Flow Trader Bullish

GBPUSD – OutlookBearish

Last week saw wild volatility for Sterling. Having sold off sharply following the September CPI data, which showed another dip into deflation at -0.1%, price reversed sharply higher with the recovery boosted further by the latest UK employment data showing that unemployment has hit a seven year low at 5.4% and wage growth continues to increase rising to 3.0% from 2.9% previous. Traders will turn to public sector net financing data on Wednesday and retail sales on Thursday

COT Indicators

Strength active sell signal, ticks down

Index active buy signal, ticks down

Momentum active buy signal, ticks down

LFOrder Flow Trader Bearish

USDJPY – Outlook Bullish

The Japanese Yen was stronger last week as weakness in Chinese imports and CPI spurred safe haven flows. BOJ minutes release showed that the BOJ remain content with the effects of the current QE program with members remaining upbeat over the inflationary path and economic recovery

COT Indicators

Strength active buy signal, ticks down

Index active sell signal, ticks lower

Momentum active buy signal, ticks down towards convergence levels

LFOrder Flow Trader Bearish

USDCHF – Outlook Bullish

People’s Bank of China is considering starting direct trading between Yuan and Swiss Franc, thus, the Swiss Franc would become the seventh major currency to be exchangeable directly for Yuan in Shanghai. Looking ahead this week, market participants will look forward to Switzerland’s trade balance data for September, scheduled to be released tomorrow

COT Indicators

Strength active buy signal, ticks down

Index active buy signal, ticks down

Momentum active buy signal, ticks down

LFOrder Flow Trader Bearish

AUDUSD – Outlook Bearish

The Australian Dollar remained resilient this week fighting to retain gains made over the previous fortnight. Commodity weakness early in the week, spurred by the data weakness in China, saw the Aussie losing ground before price was able to recover on USD weakness following weak Retail Sales figures, only to be led lower on post US-CPI Dollar strength, ending below last week’s highs. Traders will focus on the release of the RBA meeting minutes release looking for further colour following the Bank’s very neutral October statement

COT Indicators

Strength active sell signal, ticks up

Index active sell signal, ticks up towards convergence

Momentum active sell signal, ticks up

LFOrder Flow Trader Bullish

USDCAD Outlook – Bullish

Despite the decline in Oil this week, falling back from the $50 per barrel level, the Canadian Dollar was able to retain gains made against the US Dollar amidst USD weakness. Traders now look ahead to the Bank of Canada rate decision this upcoming Thursday with the Canadian general election on Monday adding further uncertainty to the trading outlook.